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Newmont’s O’Brien Says World Gold Output Will Decline

February 9, 2008 at 5:27 by Mario

Newmont Mining Corp., the world’s second-largest gold producer by volume, said global production of the precious metal will decline as new deposits that are profitable to mine become harder to find.
“It’s more unlikely that we’ll find big deposits, near the surface, that are economic to mine,” Chief Executive Officer Richard O’Brien said today in a presentation to analysts in Denver, where the company is based. “We see a continued decline in production — not just ours, but everybody’s.”
Global output fell to a 10-year low of 2,479 metric tons in 2006, according to London-based researcher GFMS Ltd. The firm expects 2007 production of 2,444 tons.
Gold prices have gained for seven straight years, reaching a record $942.20 an ounce on Jan. 30, amid increased investor demand, higher costs of production and a dearth of new discoveries to replace output. Mining companies had reduced exploration expenditures in the previous decade after bullion prices dropped as low as $253.20 an ounce in 1999.
Newmont estimates that only 4 percent of all new gold discoveries are larger than 5 million ounces, O’Brien said. Newmont will consider developing deposits smaller than 10 million ounces in future, he said.
Boddington Mine
The company is digging the Boddington mine in Australia and will decide this year whether to develop the Conga deposit in Peru and the Akyem project in Ghana. Newmont also made a new discovery at its Nassau joint venture with New York-based Alcoa Inc. in Suriname, Newmont exploration manager Ian Douglas told analysts in Denver.
The company budgeted $240 million to $255 million for exploration projects in 2008, up from $198 million spent last year, O’Brien said. Contractor drilling costs jumped 30 percent in 2007, he said.
Newmont rose 65 cents, or 1.3 percent, to $50.87 at 1:20 p.m. in New York Stock Exchange trading. The stock has gained 4.2 percent this year.

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